Online advertisement placements generally refer to the slots or space on the pages of a website that are available for displaying advertisements along with its content. Advertisers typically bid on these advertisement placements that are made available through real-time bidding (RTB) exchanges such as AdX, Admeld, Pubmatic, etc.
From a mechanical perspective, this requires a bidding server to have computer hardware linked to the RTB exchanges. The bidding server then receives bid requests via the RTB exchanges. A bid request occurs when a user/internet surfer visits a website/publisher that is selling their advertisement space on an RTB exchange. Upon receiving a bid request, the bidding server has a very short period of time within to respond to this request (generally around 50-100 ms or less). Since this bid response needs to occur in a very short period of time, it is difficult to run large scale models to predict what advertisements to buy and what price to pay for them.
Traditionally, an advertiser manually made simple static rules to be carried out at bid time. The advertiser observes and determines which domains were available on the exchanges. The advertiser selects the domains to bid on by entering them into an excel document. Then, after several days, the advertiser receives a report and visually weighs each domain against its click-through-rate (“CTR”) to decide if the advertisement performed adequately. The CTR refers to the percentage of times users click on the advertisements given the number of times the advertisements are displayed (“impressions”). The advertiser removes poor performing domains and adds new domains. This traditional approach is largely a process of trial and error that relied to a great extent on human memory and human judgment in an effort to meet CTR goals and to ensure enough domains are chosen so that the campaign meets the periodic impression quota. Therefore, this traditional approach is more prone to human errors. Furthermore, because domains are generally bid on with a single static price, advertisers often pay too much for advertisement placements or do not win more valuable bids at the set price.